Flurbiprofen (FP) is a phenyl alkanoic acid derivative and a family of non–steroidal anti-inflammatory drug used in the treatment of arthritis. The aim of this study was to prepare a new parenteral formulation for FP that can prolong the biologic half-life of the drug, improve its therapeutic efficacy, and reduce its associated side effects targeting the inflammation due to arthritis. PEG-anchored (stealth) and non–PEG-anchored liposomes were prepared by thin film hydration technique followed by extrusion cycle and characterized for in vitro and in vivo. Stealth liposomes (SLs) exhibited increase in percent encapsulation efficiency (68%) and percent drug retention during release studies in 24 h (71%) with good stability for a period of 1 month at –20°C and 4°C (refrigerated temperature) compared with other liposomes. The maximum percent edema inhibition (58%) and significant analgesic effect of 13 s were determined for SLs. The pharmacokinetic parameters after i.v. administration to arthritis induced rats were determined and compared with non-SLs. The marked differences produced for SLs over those of non-SL (conventional) formulations with an increase in area under plasma concentration time curve, t1/2, mean residence time, and reduced clearance. The drug localization in liver, spleen, and kidney were significantly higher for non-PEGylated liposomes than the SLs. Nearly 3-fold increase in drug concentration was measured in arthritic paw when compared with the other liposome formulations. Thus SLs may help to increase the therapeutic efficacy of FP by increasing the targeting potential at the site of action.